REUTERS | Peter Cziborra

The Contract (Third-Party Rights) (Scotland) Act 2017 was passed by the Scottish Parliament on 21 September 2017, it received Royal Assent on 20 October 2017 and it comes fully into force today, 26 February 2018, bringing Scottish contract law into line with the approach adopted in the rest of the UK vis-a-vis third party rights. The 2017 Act is not retrospective, so while the common law rule of jus quaesitum tertio does not now apply to contracts entered into in Scotland from 26 February 2018, it may still apply to contracts entered into before this date unless the contracting parties now contract otherwise.  Continue reading

REUTERS | Siphiwe Sibeko

One of the interesting features of the recent decision of Coulson J in Ziggurat (Claremont Place) LLP v HCC International Insurance Company Plc is the effect on a guarantee of a contractor becoming insolvent many years after a construction project has been completed. In Ziggurat, the amended ABI model form of guarantee bond had not yet expired. This allowed the employer to make a claim under the guarantee arising out of the contractor’s insolvency, notwithstanding the fact that the contractor’s employment had already been terminated and the project had achieved practical completion.

The employer’s argument in Ziggurat was based on the Court of Appeal decision in Wilson and Sharp Investments Ltd v Harbour View Developments Ltd. The effect of the decision in Harbour View is that the employer’s rights under clauses 8.7 and 8.8 of the JCT contract, which arise upon the contractor’s insolvency, survive notwithstanding the fact the contractor’s employment has already been terminated. In other words, an insolvency event which occurs after termination of the contractor’s employment can be relied on to relieve the employer of payment obligations and to trigger the clause 8.7.4 accounting exercise. This has important implications for a bondsman providing a guarantee in respect of the contractor’s performance on a construction project, where the guarantee responds on an insolvency.  Continue reading

REUTERS | Maxim Shemetov

Some of you may recall that back in 2015 I wrote about the Conflict Avoidance Process (CAP) developed by RICS’ Dispute Resolution Service and Transport for London. Since then CAP provisions have been included in the contracts of four major TfL projects, and there have been memoranda of understanding signed on other projects to allow the parties to use CAPs.

There have been over 15 CAP referrals to date, and the feedback received has been positive. Parties have found that the non-binding recommendations made by CAP members during the course of major projects have helped them to make informed judgments on how to proceed and avoid more formal dispute resolution proceedings. Certainly my experience when acting as a CAP member has been that parties have generally embraced the process.

However, since I wrote my blog about CAPs, there have been more developments in dispute avoidance. Continue reading

REUTERS | Siphiwe Sibeko

The Construction Act 1996 has recently come in for some stick. Not, in this particular case, because of its operation, but because of the exceptional circumstances in which it does not apply. This stick is revived, previously-wielded stick, but stick all the same.

In the latest Severfield decision of November 2017, Severfield (UK) Ltd v Duro Felguera UK Ltd (No. 2) [2017] EWHC 3066 (TCC), Coulson J reaffirmed his criticism of the “misconceived” basis on which Parliament justified the exclusion of certain industries from the provisions of the Construction Act and of the injustices which may flow from that exclusion.  Continue reading

REUTERS | Ammar Awad

Coulson J has a certain turn of phrase, one that will be sadly missed from TCC judgments when he moves up to the Court of Appeal next month. My title is borrowed from the discussion on whether there ought to be a stay execution, hidden away at paragraph 71 of his judgment in Equitix ESI CHP (Wrexham) Ltd v Bester Generacion UK Ltd. It made me smile when I came across it. Continue reading

REUTERS | Christian Hartmann

I haven’t blogged about alleged breaches of natural justice for a while, so here goes with the first reported judgment from Joanna Smith QC, who was sitting as a deputy High Court judge in the TCC. In my view, the judgment in Victory House General Partner Ltd v RGB P&C Ltd is very well written: it is clear, concise and very readable.

Before diving into the natural justice issues, I should just mention the warning about using Part 8, a warning that Jefford J first gave last year in Merit Holdings Ltd v Michael J Lonsdale Ltd. I looked at that judgment at the time and note Victory House is another example of a case where the TCC is trying to crack down on what the judges perceive to be an abuse of the Part 8 process. Continue reading

REUTERS | Regis Duvignau

It’s the time of year when many of us may be looking to adopt good habits for our New Year’s resolutions. For those tasked with reviewing and agreeing contract documents – in particular the technical and pricing documents – the recent decision of Coulson J in Dynniq UK Ltd v Lancashire County Council may provide some timely inspiration.

The case involved interpreting wording within pricing documents of a term service contract, and afforded Coulson J the opportunity to remind us of the established principles of contract interpretation.

However, what surprised me when reading this case was not these principles – or the court’s application of them – but the fact that this dispute had come so far in the first place. This is especially given that the TCC found that the proper interpretation “[does not give] rise to any real difficulties at all” and that there is “no lack of clarity in the words” which were at issue.

This got me thinking about the importance of fully appreciating the wording used in the pricing documents and other technical annexures to a contract (even where the contract is based on an industry standard form) and the effect this may have on the contract’s operation. Continue reading

REUTERS | Dominic Ebenbichler

There is a well-known saying, “beggars can’t be choosers”, which is generally accepted to mean that sometimes you have to accept a situation because it is the only one available to you. I feel a bit like that discussing a recent Fraser J extempore judgment, Meadway Private Clients (Liongate) Ltd v Wildacre Ltd.

What caught my eye in the Lawtel report I was sent was the order to commence an adjudication. Continue reading

REUTERS | Carlo Allegri

With the recent collapse of the last pillars holding Carillion’s crumbling edifice upright, the usual cries of “how did this happen” have started to echo across the national press.

One suggestion is that Carillion may have been guilty of under-pricing jobs to win work and fill its pipeline. Having had no real dealings with Carillion I would not want to speculate on the cause of its woes. However, deliberate under-pricing does represent something of a systemic issue in the industry, particularly in the public sector and in utilities where procurement regulations apply.

The procurement regulations are designed to ensure that work is placed through an open and competitive market. In an efficient market, economists tell us, the price should be right. If so, how do we end up with a situation where systemic under-pricing is a “thing”? Continue reading

REUTERS | Ilya Naymushin

Over the past few months, a number of large construction companies have been making headlines for facing severe financial difficulties. However, sub-contractor insolvency can also cause considerable problems for other parties on construction projects who have contractual relations with that party.

In Multiplex Construction Europe Ltd v Dunne, the main contractor (Multiplex) took steps to try to secure the solvency of its sub-contractor (DBCE), by advancing DBCE £4 million so it could see the project to completion. The fact that Multiplex advanced such a significant sum demonstrates the enormity of sub-contractor insolvency, as does the willingness of DBCE’s owner to stand as surety in his personal capacity for the sums advanced.

The case is a timely reminder of the care that parties should take when entering into suretyship agreements, particularly when such agreements are capable of amounting to a contract of indemnity, and the consequences that thereby follow for the surety. Continue reading